Buying Your First House: The Financial Guide.
Buying your first house will be one of the most expensive purchases you will make. It can be exciting as well as overwhelming, especially if you are not familiar with the process involved in purchasing a home.
There are a number of factors to consider when purchasing your first home, including your credit score, your budget, and financing the home.
This guide will provide you with valuable information from searching for the perfect home to the mortgage.
Can you afford it?
The first and one of the most important things to consider is how much you can realistically afford to pay for your new home.
For that, I advise you to consult a financial advisor, that will evaluate the amount that you can borrow based on your income and debt level.
Once you get an idea of how much the bank will be willing to loan you, you can use a mortgage calculator to estimate your monthly payments or PITI (principal, interest, property taxes and insurance).
Then, based on your current budget, you will be able to know if you can afford the monthly mortgage payments in addition to other expenses you incur every month.
Know your credit score
When you apply for a mortgage, the lender will check your credit rating to determine if you qualify for a loan and how much you qualify for.
It is very important that you know what your credit score is and if needed, how to improve it. You should get your current rating from each of the main credit bureaus in your country.
There may be slight differences between the three scores, but your total score should be in the same category between them.
For example, a FICO score of 720-799 is excellent, 680-719 is good, 620-679 is good, but you most likely have a few poor marks on your report, and 579 and lower is considered poor.
If you fall in the poor to good range, it is important to take the steps necessary to improve your credit score and talk to a financial advisor.
Financing your new home
It is recommended that you are pre-approved for financing once you have begun searching for your home.
If you are pre-approved you will have a better idea of how much you can afford to pay for your new home.
It is important to do your homework before you sign the contract with a lender to understand the difference between fixed, split, variable, and interest-only loans.
You should talk with at least three different lenders about financing options and compare fees and interest rates.
Lenders also tend to be familiar with the needs of first time home buyers, including various government programs, such as the First Time Home Owners Grant.
Finding your first home
Once you have your credit in order and have gotten pre-approved for financing, the next step is to find a reliable and trustworthy real estate agent.
When you meet with the realtor, you should have a basic idea of the area you want to live in, how many bedrooms and bathrooms you want, and the maximum amount you want to spend.
Only view homes that are at or below your price range, because looking at homes outside of your range may tempt you to spend beyond your means.
After you find the perfect home, negotiate the price if possible, and always have an inspection.
The final part of the process is going to the closing of your new home, with the help of a notary.
That’s all on Buying Your First House: The Financial Guide.
This article was written by Meinna Gwet. Her specialty is in enterprise risk management for banks and insurance companies.